Better measurement of risk-taking is important not just to regulators, but also to banks and their investors, according to the Bank of England's Andy Haldane, who said today that "risk illusion rather than a productivity miracle" is what drove the financial sector's high returns in the run up to the crisis.

Speaking at The Future of Finance conference at the London School of Economics and Political Science this morning, the Bank's executive director of financial stability stressed the importance, and difficulty, of weighing finance's contribution to the wider economy when evaluating potential post-crisis reforms.

He said: "According to the National Accounts, the nominal gross value-added of the financial sector in the UK grew at the fastest pace on record in Q4 2008...At a time when people believed banks were contributing the least to the economy since the 1930s the National Accounts indicated the financial sector was contributing the most since the mid-1980s."

Attempting to explain the mystery and "square this circle", Haldane said: "Risk illusion, rather than a productivity miracle, appears to have driven high returns to finance. The recent history of banking appears to be as much mirage as miracle."

He noted that banks' return on assets, a truer measure of productivity, fell from 2002 even as returns on equity rose.

Among the regulatory and structural initiatives underway, said Haldane, three warrant further attention.

First, there is a strong case to seek better ways to measure finance's value-added, including potentially more sophisticated risk-adjustment methods and more focus on returns on assets rather than equity by investors.

Second, regulators must be mindful of risk migrating outside the perimeter of regulation where it would likely be not measured, warned Haldane.

Third, he noted that finance, rather than being "monolithic", comprises different business lines where reliable data is often absent, raising questions about the risks they embody and the competitive structure of those markets.

Such structural issues, he said, are likely to take centre stage, based on events that followed the 1930s Great Depression.